• Net income was C$623 million, or C$0.75 per diluted share, compared with net income of C$555 million, or C$0.65 per diluted share, for the year-earlier quarter.

• Excluding gains on rail line sales in both the 2014 and 2013 periods, first-quarter 2014 adjusted diluted earnings per share (EPS) increased eight per cent to C$0.66 from adjusted diluted EPS of C$0.61 in Q1-2013. (1)

• Adjusted Q1-2014 net income of C$551 million increased six per cent over adjusted net income of C$519 million for the first quarter of 2013. (1)

• Q1-2014 operating income increased five per cent to C$820 million.

• First-quarter 2014 revenues increased nine per cent to C$2,693 million, revenue ton-miles grew by five per cent, and carloadings increased one per cent.

C• N’s operating ratio for Q1-2014 deteriorated by 1.2 points to 69.6 per cent from 68.4 per cent the year before.

• Free cash flow for the first quarter of 2014 was C$494 million, compared with C$151 million for the year-earlier quarter. (1)

Claude Mongeau, president and chief executive officer, said: “CN delivered solid first-quarter results thanks to a dedicated team of railroaders who labored long and hard to keep us rolling through the harshest winter in decades.

"The winter of a lifetime took its toll on network capacity and affected all of our customers, but I’m pleased that CN’s recovery is now well underway, with key safety, operating and service metrics returning to pre-winter levels.

“With continued focus on supply chain collaboration and solid execution, CN is reaffirming its 2014 financial outlook and increasing its capital envelope to C$2.25 billion in support of its commitment to growth, efficiency and safety.”

Foreign currency impact on results

Although CN reports its earnings in Canadian dollars, a large portion of its revenues and expenses is denominated in U.S. dollars.

The fluctuation of the Canadian dollar relative to the U.S. dollar, which affects the conversion of the Company’s U.S.-dollar-denominated revenues and expenses, resulted in a positive impact to net income of C$26 million (C$0.03 per diluted share) in the first quarter of 2014. (1)

CN is aiming to deliver double-digit EPS growth in 2014 over adjusted diluted 2013 EPS of C$3.06, as well as free cash flow in the range of C$1.6 billion to C$1.7 billion. (1)

CN is now targeting 2014 capital spending of C$2.25 billion, an increase of C$150 million over its previous spending forecast of C$2.1 billion announced on Dec. 10, 2013, and C$250 million higher than 2013 capital spending of C$2.0 billion. (2)

First-quarter 2014 revenues, traffic volumes and expenses

Revenues for the first quarter of 2014 increased by nine per cent to C$2,693 million.

Revenues increased for petroleum and chemicals (23 per cent), intermodal (12 per cent), metals and minerals (seven per cent), coal (seven per cent), and grain and fertilizers (six per cent).

Forest products revenues were flat, and automotive revenues declined by four per cent.

The increase in revenues was mainly attributable to the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; freight rate increases; higher freight volumes due to strong energy markets and market share gains, particularly in intermodal; and the impact of a higher fuel surcharge as a result of higher volumes.

Revenues were negatively affected by operational challenges due to an unusually harsh winter that reduced CN’s capacity to serve its customers.

Carloadings for the quarter rose one per cent to 1,239 thousand.

Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased by five per cent over the year-earlier quarter.

Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased by four per cent over the year-earlier period, driven by the positive translation impact of the weaker Canadian dollar and freight rate increases, partly offset by an increase in the average length of haul.

Operating expenses for the quarter increased by 11 per cent to C$1,873 million, mainly attributable to the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses, operational challenges due to an unusually harsh winter resulting in increased purchased services and material expense, increased fuel costs and higher casualty and other expense.

The first-quarter 2014 operating ratio was 69.6 per cent, compared with 68.4 per cent for the year-earlier quarter, a 1.2-point deterioration.